Categorized | 2006 Enterprise Articles



Special Session Schizophrenia: $70 million income tax cut to be offset by $50 million sales tax hike?

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by Howard Stephenson

The push is on to enact a dual income tax system in a special session on September 20 and to enable a ¼ cent sales tax hike in Salt Lake County for light rail expansion.  The new taxes in Salt Lake County would be significantly higher than the tax cut.

Everyone knows Utah state and local governments are awash in surpluses, so it’s an opportune time for a $70 million income tax cut to make Utah more competitive for job creation.  But with all the surpluses many are asking why the governor and legislature would even entertain the idea of a sales tax increase.

Proponents of the tax hike include the Salt Lake City Chamber of Commerce which believes it’s the best way to fund light rail expansion.

Transportation needs are real

Like the Utah Taxpayers Association supports massive increases in transportation funding but believes that Utah’s problem is high taxes, not inadequate spending.  The Association argues that realignment of current revenues should first be done before taxes are increased.

The Utah Taxpayers Association recognizes that Utah has very serious, unfunded transportation needs which, if not resolved, will have detrimental effects on the Utah economy.  Highway congestion in our state is a hidden tax on economic activity. The consequence of failing to address the looming transportation crisis is slower economic growth and therefore a greater burden on Utah taxpayers in the future. For that reason, the Utah Taxpayer’s Association agrees with the Salt Lake Chamber and others that transportation funding must be given a very high priority in our state.

New project prioritization process needed

At the same time, the Association believes the State must develop a process to weigh transportation needs and allocate revenues under one decision-making authority based on cost effectiveness and need, particularly reducing rush hour congestion, rather than leaving transit and highway governance in separate silos with separate funding priorities.  The current “silo” mentality that exists between Utah Transit Authority priorities and Utah Department of Transportation priorities doesn’t work well and needs to be permanently fixed.

Additionally, the Taxpayers Association encourages the Legislature to act quickly to preserve right-of-way corridors for future transportation expansion through bonding.  This would save millions of dollars in future land acquisition costs and thereby reduce the costs of new transportation projects.

Congestion pricing works

The Association also supports greater use of congestion pricing to ensure lower peak traffic congestion.  This includes the use of tolls and HOT lanes to incent drivers to drive during off-peak times.

Congestion pricing encourages efficient use of our transportation infrastructure which in the long run will allow the state to slow the growth in transportation expenditures.

The Wall Street Journal recently published an article on congestion pricing in Stockholm where fees vary depending on time of day. For example, between 6:30 p.m. and 6:29 a.m., drivers can drive into Stockholm at no charge. However, fees are imposed during the rest of the day and peak during rush hour.  Fees range from $1.38 to $2.07 to $2.76. The Swedish government contracted with IBM to implement the system. Cars are tracked by reading license plates or by transponders.

Under the new plan, rush hour traffic decreased by 22%, accidents involving injuries fell by 5% to 10%, commute time during rush hour decreased by about one third, and use of all forms of mass transit increased by 6% and ridership on inner-city bus routes increased by 9%.

Transit is a statewide benefit – even if you don’t ride it, you use it

Utah rural roads are among the most scenic in the nation.  I’ve driven most of them.  I got used to avoiding the beaten path as I grew up in five different small rural Utah communities.  Last week my wife and I drove to Torrey, a small town in Wayne County.

The two-lane highway from Richfield to Torrey was an excellent road.  As I encountered oncoming cars about three to six minutes apart I realized that if the highway had to be paid for through motor fuel taxes generated by the cars using the road, it would be a cow trail instead of the excellent and safe surface we enjoyed.  Wisely, Utah policymakers have funded a statewide transportation system without regard for where the money was generated.

However, when it comes to the Wasatch Front, we require taxpayers to pay for both rural subsidized highways and to fund transit with local taxes.

For some reason, we took a wrong turn a few years ago to require that  taxpayers in Wasatch Front counties not only appropriately subsidize roads in rural Utah, but when it comes to alleviating congestion on urban highways, they are required to pay hundreds of millions of dollars more each year in higher transportation-dedicated sales taxes.

This disproportionate tax burden is made even more obvious as the Governor and Utah Legislature debate the potential special session proposal for enabling a rise in the current ½ cent sales tax for transportation projects in Salt Lake County to ¾ cent.  UTA General Manager John Inglish says his ultimate goal is a whole penny.

Instead of increasing sales taxes $50 million in Salt Lake County, the legislature should dedicate $50 million more of the vehicle-related sales taxes to prioritized road and transit projects.  Under the new prioritization process suggested above, the real needs of transit and highways can be addressed.  Ultimately new tax revenue will be needed, but it should be raised on a statewide basis, not a county tax.

The importance of expanding and maintaining adequate transportation infrastructure cannot be overstated.  It is critical to Utah’s economy.  But transportation reform is just as important as tax reform and education reform.



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